Monday, September 29, 2014

How 30 Minutes Now Can Save You $1,000 Later in Taxes

With a headline like that, you might be prepared for a bait and switch. But we’re serious here. You really can save up to $1,000 in only a half-hour.

However, there is a catch. We have to talk about taxes.

I know! Who wants to talk about taxes in September? Not me, that’s for sure.

While tax planning isn’t anyone’s idea of fun, it doesn’t have to be long, difficult or painful. In the amount of time it would take to find out if the family on “House Hunters” is going to pick the perfect home or compromise for the obviously inferior property (hint: they always compromise), you could have done something to ensure you’ll have an extra $1,000 next April.

Find Deductions Hiding in Your Closets

The first way to put that half-hour to good use is by cleaning out your closets and taking the contents to your favorite thrift store for a tax deduction.

Set the timer for 30 minutes and go wild. Be ruthless. It’s like “Supermarket Sweep,” but you’re cruising through your home rather than running through the grocery aisles.

Those skis Junior never used? Gone. The baby clothes from your 4-year-old? Outta here. The scrapbooking supplies that haven’t seen the light of day in two years? Sayonara.

This strategy has a double benefit. Not only do you get a deduction that can lower your tax bill next year, you’re also making space just in time for the rush of holiday gifts that will be arriving shortly.

Beef Up Your Retirement Savings

Another way to use those 30 minutes is to review your retirement accounts and see if you can afford to contribute a little more.

For 401(k) and 403(b) accounts through your workplace, you can contribute up to $17,500 this year, an amount that can be deducted from your taxable income. If you’re 50 or older, you can contribute up to $23,000.

Even if you don’t have an employer-sponsored retirement fund, you can contribute money to your own IRA and get the same tax benefits. IRA contributions for most workers are maxed out at $5,500 in 2014, with those 50 and older eligible for a deduction on up to $6,500 in contributions.

Depending on your tax bracket, you could save 30 cents in taxes for every dollar you contribute to an eligible fund. Remember, there are income caps for some of these deductions, and you get an immediate tax benefit only if you have a traditional 401(k), 403(b) or IRA. If you have a Roth account, you still get tax benefits, but not until after you retire.